Discourse on the effectiveness of external public development finance flows is at a turning point. The development landscape has experienced dramatic shifts over the last two decades. The rise of the Global South is redefining the contours of development cooperation. In this context, this article examines the imperative of a new conversation on development effectiveness "from the bottom up". Four dimensions are addressed-- conceptual concerns, emerging trends, political economy issues affecting the global and country levels, and issues related to the measurement of effectiveness of international development cooperation.
CONCEPTUAL CONCERNS: Discourse on development cooperation effectiveness has significantly evolved over time. Aid policies have been influenced by contemporary dominant theories. The development effectiveness agenda, as espoused by the Global Partnership for Effective Development Cooperation (GPEDC), remains dominated by the member states of the OECD's Development Assistance Committee. North-South Cooperation and South-South Cooperation diverge in terms of the scope and principles that guide their development cooperation. North-South Cooperation is usually confined to official or public cooperation. In the case of South-South Cooperation, public and private sources of cooperation are not as distinctive. Member states of the Development Assistance Committee do not tie their aid to procurements, but impose other conditionalities against continuation of finance flows, which reduces their predictability. South-South Cooperation adheres to the norm of non-interference in domestic affairs, but does not shy away from tying aid to procurement under the principle of "mutual benefit", having implications for transaction costs. While Northern providers engage in coordinating aid efforts and achieving policy coherence, this emphasis has not been noticed in Southern providers.
Areas where the two types of cooperation overlap are in prioritising national ownership and alignment with recipient country's priorities; inclusiveness and multi-stakeholder participation; importance of capacity development; compliance with the principle of transparency and mutual accountability; and results-driven processes. There are also apparent trends of "Southernisation" of the North (e.g. moving towards economic cooperation) and "Northernisation" of the South (e.g. taking more interventionist stances). These trends might tempt one to suggest that we are witnessing a process of mutual alignment. However, the burden of any possible convergence may fall on the shoulders of the poorer recipient countries.
There are three different routes that the effectiveness agenda could move from here. The first is the least likely scenario; a business-as-usual approach, where traditional perspectives and practices continue with the "old rules" defining the "old game"; the GPEDC Zero. The second possibility is a GPEDC Plus scenario, where efforts to bring in more tailored and contextualised approaches are expanded; the "old game, with new rules". The third possibility is GPEDC 2.0; an altogether "new game with new rules" towards a mutual learning platform. It is this scenario that the rest of the article focuses on as the most desired route.
EMERGING TRENDS: Implications of the changing landscape in development cooperation effectiveness are more pertinent than ever. Financing requirements for implementing the Sustainable Development Goals (SDGs) in low-income developing countries are enormous. Growth in overseas development assistance has been less than encouraging in recent years, while Development Assistance Committee providers' forward spending plans indicate a new stagnation. However, membership of the Development Assistance Committee has enlarged, the number of other providers reporting to the OECD has increased, and Southern providers have become more prominent in scale and visibility. Many new international finance institutions and development finance institutions have been established, including by Southern providers.
The aid climate is further affected by a foreboding global economic slowdown, an unfolding US-China trade war, the faltering World Trade Organisation, a fragmented European Union, pandemics, and rising national and international inequality, worsened by automation and the fourth industrial revolution. These have created a structural disjuncture of development cooperation regime with the need of inputs from grass-roots organisations.
In this context, multilateral development banks, along with global funds and a myriad of international finance and development finance institutions, have become important channels of external financial assistance. Beyond traditional multilateral development banks, new development banks such as the Asian Infrastructure Investment Bank, founded by Southern countries, have been established. Share of overseas development assistance towards fragile states has improved for both multilaterals and regional development banks. Curiously, economic infrastructure has emerged as the most preferred sector for all genres of external development finances. A lot of development finance is also being swayed away by humanitarian assistance. Protecting external assistance for the social sectors is becoming a challenge for the poorer developing countries.
In today's SDGs era, the role of the private sector will become a significant component of development finance. However, mobilisation of private finance through overseas development assistance is disproportionately lower in least developed countries. The sectoral distribution of blended finance indicates a preference for low risk investments with clearer business cases and revenue streams. There is room for rethinking the design and governance of blended finance, especially in relation to contextual realties of recipient countries to optimise development impact and inclusivity.
Integral to the discussion of aid effectiveness are greater domestic private finance and improving the flow of domestic public revenue. These challenges cannot be addressed by the existing, and often dysfunctional, development cooperation architecture. Financing the ambitious 2030 Agenda requires the mobilisation of all types of interlocutors of the financial markets within a shared framework; these stakeholders range from bilateral providers (including Southern), regional banks and multilaterals institutions, to blended finance and private philanthropy. Such a shared framework would enhance the allocative efficiency as articulated by the recipient countries, allowing them greater flexibility in aid portfolio management. A move towards the realisation of this aspiration would need a "new conversation", espousing the novel multilateralism, which would amount to a "new game with new rules".
POLITICAL ECONOMY: Political economy aspects embedded in the development cooperation regime and its outcomes are often rooted in the intrinsic imbalance of power, evident in traditional provider-recipient relationships. Power imbalances in this context may be understood as the control that one party exercises over the other through supplying or withholding of development assistance. Such imbalances exist in traditional North-South cooperation relationships. The dominance of Northern providers over Southern recipients is manifested in ownership and governance of international institutions.
Actual or perceived financial and institutional capacity constraints of recipients contribute to control issues over development interventions in provider-recipient relationships. Weak political support of governments domestically, together with an overreliance on foreign assistance to strengthen political legitimacy at home, often keep recipient governments from challenging power asymmetries. Diversity among an increasing base of actors makes collective action for more effective accountability mechanism difficult.
While the problem of collective action could be dealt with by addressing underlying trust issues or strong leadership, it would be much more difficult to tackle the challenge of diverging vested interests. The lack of a shared development cooperation framework for the promotion of development effectiveness may thus require some basic global norms, accompanied by other institutional arrangements and strategies throughout the implementation of programmes with external public finance. While a UN-mandated forum such as the Development Cooperation Forum has potential, a GPEDC 2.0 can bring new energy to the global agenda.
In any new development cooperation architecture, recipient countries' ownership is critical. Government ownership would be replaced by in-country democratic ownership. Such democratically-designed plans could be achieved by utilising national institutions and capacities. Good practices of country ownership thus entail a position that allows greater control of recipients over their development agenda. The concept of ownership is politically defined by the power dynamics between providers and recipients, and determined through the exercise of control over the outcomes of that relationship.
Mutual accountability between providers and recipients is a core principle in the effectiveness agenda. The challenges of achieving mutual accountability in the context of an asymmetric power distribution and diverse interests are less clear, especially as there are broken feedback loops, which impede the effective practice of mutual accountability. In national democratic systems, public policy beneficiaries can hold the government to account through electoral votes. In the case of international development cooperation, both geographical and political distance make the links between providers of cooperation and the final beneficiary almost impossible. Split constituencies have implications for the decision-making process and can induce ownership challenges. Given governance challenges and imperfect democracies, domestic accountability lines in the recipient are also far from ideal. The important question is which line of accountability should each party prioritise for effectiveness and how that line can be enforced.
The aspired "new conversation" on development cooperation is expected to put political economy aspects at centre stage. The "new rules" of the "new game" will have to ensure balance, particularly by addressing the problem of collective action by the recipients which would hopefully do away with the current practice of multiple channels of accountability and lacking feedback loops. Strengthened accountability mechanism within the development architecture may enhance predictability of resources, allowing the recipient countries to undertake and own more credible integrated planning of development finance.
MEASUREMENT CHALLENGES: Flow of overseas development assistance is an inadequate indicator to measure development cooperation efforts. Country programmable aid, the amount actually disbursed to the recipient country, would be a better measure in this regard. Challenges of effectiveness measurement are multiplied by complexities related to various issues, including concepts, methodologies, scale, level, sectors, timeframes, contexts, capacities, and data. Assessment frameworks broadly encompass two aspects; processes and results. Most of the broad-based established assessment frameworks operating at the global level still examine mostly the processes, and usually align their findings with adherence to global principles. The assumption is that quality of processes will lead to expected results and ensure effectiveness. However, there is an increasing demand to shift focus on outcomes and impacts, especially at the country level.
Both North-South and South-South Cooperation have focused on results in their effectiveness agenda. Results are generally understood as outputs, outcomes, and impacts often evolving with scale, level of intervention, and time. Micro-level assessment frameworks at the national level usually confine to the monitoring and evaluation exercises, although with varying approaches and methods. There is a need for more macro-focused approaches at the national level.
The implementation capacity of recipient countries is usually overlooked in assessment frameworks of effectiveness, but omnipresent in provider's considerations regarding cooperation strategies. Arguably, countries most in need of foreign aid are often lacking the necessary financial, institutional, regulatory, human resources, and governance structures required to improve their implementation capacities. Any framework for assessing effectiveness needs to factor in issues related to recipient country's capacity constraints and mitigation efforts by both recipients and providers to improve aid utilisation.
The issue of debt sustainability has become a matter of great concern in recent discussions on development effectiveness. The growing prominence of finance flows from Southern providers to low-income countries at risk of debt distress based on relatively lax conditions has given a new dimension to the debt issue. Debt sustainability should be a major consideration in the assessment of development effectiveness, especially in the case of South-South Cooperation. Providers have the responsibility not to compromise on due diligence when extending credit in risky contexts.
Effectiveness of development interventions is usually seen in the context of national policies. Issues of global systemic concerns (e.g. distorted international markets, access to technology and intellectual property rights, illicit financial flows, impact of climate change etc.) remain outside the confines of assessment frameworks. Measurement of development effectiveness has to reflect implications of these issues for the performance of local markets and institutions.
REBUILDING THE CONVERSATION FROM THE BOTTOM UP: New developments influence the course of international development cooperation every day. The space to discuss a universal frame of reference remains constrained. Further evidence from the ground to feed into the new conversation for the design of GPEDC 2.0 is needed. The much-desired refashioned conversation on development effectiveness is only feasible if new knowledge is created from the ground. This paper advocates for rolling out a number of country studies to investigate the identified issues of interest through an examination of diverging practices of different providers. The bottom-up approach is a must to move the needle on the desired conversation and gather much needed political momentum.
COVID-19 has caught the development cooperation regime unaware and exposed its structural and operational weaknesses. The emerging situation is demanding inclusive reform of the scope, modalities and assessment framework, as well as its governance structure. The allocative priorities will be subject to scrutiny, as calls for more funds for a strengthened public health system, social protection, and climate action will intensify. Investment for more and better data will be necessary for SDG-oriented disaggregated targeting. For all these and other reasons, parameters of development effectiveness discourse will undergo a serious makeover.
In the post-COVID-19 world, a "new conversation" for a "new game with new rules" concerning development cooperation and its effectiveness will gather momentum. To guide this momentum to ensure inclusive, transformative, and sustainable outcomes of international development cooperation, it will be all the more necessary to build the dialogue from the bottom up, based on new evidence and analysis.
Dr. Debapriya Bhattacharya is the Chair of Southern Voice and a Distinguished Fellow at Centre for Policy Dialogue (CPD) [email protected]
Sarah Sabin Khan is a Senior Research Associate at Centre for Policy Dialogue (CPD)[email protected]
[The article is based on the Southern Voice Occasional Paper titled "Rethinking Development Effectiveness: Perspectives from the Global South."]